Eurogroup gives Greece small repayment extension, no real debt relief

The atmosphere on Friday morning is good. Greece’s creditors cheer, international and even German media hail the Eurogroup deal as “‘end of the Greek crisis”, “Greece exits the bailout” and “the Greek debt is sustainable.” But the Eurogroup of the 19 finance ministers  did not give Greece a debt relief. Neither lower interest rates or a growth clause. What they did was to extend:
  1. EFSF debt interests repayment and maturities of Greek bonds to 10 years
  2. strict austerity
  3. tight supervision
  4. and more ‘reforms’
The deal reached in the early morning hours of Friday due to German objections regarding the time debt extension, paves also the way for Greece to exit its 8-year bailout program.

Furthermore, Greece gets a tranche of 15 billion euros, a so-called “buffer” which is one more loan. From this 15billion, 3.3 can be used to buyback loans from the IMF.
The Eurogroup statement adulates the Greeks’ sacrifices and the government’s efforts but in substance the agreement is below expectations or real rewarding.
“We congratulate the Greek authorities and Greek people for the successful conclusion of the ESM programme. The Eurogroup acknowledges the significant efforts made by the Greek citizens over the last years. Greece is leaving the financial assistance programme with a stronger economy building on the fiscal and structural reforms implemented. It is important to continue these reforms, which provide the basis for a sustainable growth path with higher employment and job creation, which in turn is Greece’s best guarantee for a prosperous future.”
In its official statement the Eurogroup says it welcomes the commitment of Greece to maintain
  • a primary surplus of 3.5% of GDP until 2022
  • a primary surplus of 2.2% of GDP on average in the period from 2023 to 2060.

At the end of the day, we end up where we started, this is at the Eurogroup, with a higher debt than in 2010.
Greek debt in 2010: €262 billion
Greek debt in 2018: €323 billion

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